Cities in Santa Clara County scramble to ban marijuana sales ahead of Jan. 1

Twenty years after California voters legalized marijuana for medicinal use, they took the next big step at the ballot box last November by deciding it’s OK to toke for fun too.

But while 57 percent of the state’s voters embraced the recreational use of pot by approving Proposition 64, South Bay cities are sitting back and waiting for the smoke to clear before amending their local laws to let the once forbidden weed openly flourish. Some are even hinting that day may never come.

As a result, anyone who expected to be able to enter a local store starting Jan. 1 and plunk down some green cash for green bud will be out of luck.

The ballot measure also made it legal for anyone 21 years or older to possess, transport, obtain or give away up to an ounce of marijuana or 8 grams of concentrated cannabis and to cultivate up to six plants indoors per household.

Instead of seizing the opportunity to reap a windfall of tax revenue from retail sales of marijuana, South Bay cities are treading gingerly, and many have called for moratoriums or outright bans of marijuana handling within their boundaries.

“There are a lot of questions about how this is all going to work, and every city and county is not the same,” said Alex Traverso, a spokesman for the state’s Bureau of Cannabis Control, which has been tasked with developing regulations for the nascent industry. “It’s really not a one-size-fits-all approach. … I can understand why they want to take a little time, because we’ve got one shot to put forth a thoughtful ordinance and one that’s going to work, and this is not something we want to battle every year.”

In Santa Clara County, most cities have passed ordinances banning dispensaries from selling marijuana, either for medicinal or recreational purposes, with the majority opting to outlaw both uses.

Campbell residents shouldn’t hold their breath for a dispensary in their city anytime soon—of the medicinal or recreational kind. City officials there say they need more time to weigh the pros and cons of each.

Three measures went before Campbell voters in a special election this spring. Two were approved, while a third—the most divisive—was rejected. Voters rejected a measure asking them to let the city license up to three medical marijuana dispensaries and allow patients and caregivers to cultivate cannabis without a license.

Kale Schulte, a consultant who has moved away but lived in Campbell at the time, placed the citizens’ initiative that was ultimately rejected on the ballot.

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Schulte said he and members of a group called Campbell Green tried negotiating with the city council by presenting options to alleviate its concerns, but he claims their efforts were met with opposition and hostility from city and police officials.

“All in all, I was really asking for there to be access for these patients to get their medicine,” Schulte said. “It just seemed there was no appetite to discuss; there was just an appetite to ban, and I didn’t like that because there was no problem.”

The election resulted in voters approving the city’s competing measure to impose a two-year moratorium on dispensaries to allow more time to study all aspects of the issue, from safety to best practices of neighboring cities, said Campbell city manager Brian Loventhal. When and if they are allowed, Loventhal said, the pot dispensaries will be subject to the same restrictions involving residences, day care centers, schools and parks that tobacco retailers face.​ ​

Jaz Small waits on a patient at the All American Cannabis Club medical pot collective in San Jose. (Patrick Tehan/Cannifornian archive)

Despite the city’s hesitancy to allow dispensaries now, voters approved a measure to levy a 7-15 percent business license tax on marijuana retailers.

According to Loventhal, the operation of three dispensaries could hypothetically generate anywhere from $130,000 to $260,000 in annual revenue—money that would go toward city services such as police, fire and code enforcement. But that isn’t enough to cover the estimated $958,000 in annual expenses that regulation of those three dispensaries would incur, he added.

​“We’re kind of in the monitor and evaluate stage for our community,” he said. “We’re trying to be meaningful with our evaluation and do it right the first time, so to speak, and that’s difficult because the environment for state laws is changing so rapidly. So we’ve decided to let the dust settle, so to speak, and then figure out the best path forward.”

Until then, Campbell residents with a doctor-approved medical marijuana card can have cannabis delivered to their home from a registered dispensary, an action the council approved in January. For Schulte, that’s a silver lining in an otherwise restrictive landscape.

“I’m pleased that there is at least delivery, that there is some mechanism, some vehicle that a patient in Campbell can get their medicine without leaving their home,” he said.

In Saratoga, the city council early this summer adopted an ordinance permanently prohibiting all marijuana sales and outdoor cultivation—the latter which previously had been legal for those with a medical marijuana card—citing safety, health and environmental concerns.

“The ordinance…can help reduce risks of criminal activities and environmental hazards,” Mayor Emily Lo said. “Our ordinance acts in the interest of protecting public safety in our community.”

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The new ordinance follows on the heels of an urgency ordinance the city passed, banning all outdoor cultivation immediately after the passage of Prop. 64. According to Lauren Pettipiece, a spokeswoman for the city, the decision was based on council members’ belief that outdoor grow sites are potential targets for theft, burglary, trespassing and robbery and that the chemicals and pesticides used on those sites can be harmful to people and the environment. The ban also aligns with the city’s tightening smoking laws, said Pettipiece. Deliveries from licensed dispensaries outside Saratoga are legal, however.

While future councils have the discretion to revise the ordinance, this council decided to “prioritize public safety and health over potential revenue” from marijuana sales, Pettipiece said.

The council’s action didn’t go over well with all residents. Janet Redman, a longtime Saratoga resident and psychologist who runs a clinic on Fourth Street, said she doesn’t understand why the city is going after medical marijuana patients, among them her adult son who has a chronic pain disorder from passing kidney stones frequently and prefers cannabis to opioid drugs.

Prior to the ban, Redman said she grew marijuana for him in her back yard without any issues. She’s attended several city council meetings to speak on his behalf, but gotten nowhere. The city’s restrictions create a significant hardship for patients, she said, because indoor cultivation can be costly as well as a fire hazard.

It is cheaper to grow marijuana outside than inside the home, where costs can reach $20,000 to set up the right conditions, or to buy it from a dispensary, which can run up to $600 monthly, Redman said.

Personal cultivation also gives patients more control over the safety and cleanliness of the product, she said.

“My personal feeling is that the cities are afraid of what Jan. 1 is going to bring,” she said. “When people are fearful, their natural response is to try and over-control; they want to control everything they can and my feeling is this is what the cities are doing.”

The Redmans’ neighbor, Jonas Persson, spoke before the city council in September in support of lifting the restrictions for chronically ill patients. He said he found the council’s position on the issue “disappointing” and wished that his own father, who died years ago from prostate cancer, had used marijuana for his pain.

“It’s unclear what triggered (the city council) to make this change,” he said. “You would think people in this day and age or in Silicon Valley would use data to justify their decision. You have to think about the people who are sick first and who are being helped by this. Of course, there will be someone who’ll misuse it, but that’s not the end of the world.”

The council has offered a number of reasons for the outdoor cultivation ban. In a city staff report from last November, Santa Clara County Sheriff’s Capt. Rich Urena said violent confrontations between homeowners and people attempting to take their outdoor marijuana plants have been documented. Urena also told the city that neighbors frequently raise concerns about strong odors, chemical use and pesticides associated with outdoor marijuana cultivation, particularly around children.

The city says outdoor cultivation can result in various code violations and increase the risk of fire in a city already vulnerable to it.

Like Saratoga, Cupertino also chose to extend its urgency ordinance in September to continue banning non-medical marijuana dispensaries, cultivation and cultivation facilities, commercial cannabis activities and transport and deliveries. The moratorium gives city officials another year to come up with a plan for dealing with commercialized marijuana.

Sunnyvale voted on Sept. 26 to ban outdoor personal and commercial marijuana cultivation and non-medical commercial marijuana activity, but like many other cities, it plans to revisit the issue in the future. Councilwoman Nancy Smith said the city is being cautious to retain local control.

The city has prohibited medical marijuana dispensaries since 2010. Last year, it voted to also ban medical marijuana cultivation, delivery and other commercial activities in the city. The recent vote will now include non-medical marijuana in that ban.

Los Gatos has banned the sale, cultivation, transportation and delivery of marijuana for both medical and recreational purposes because of health and safety concerns associated with the drug, according to town manager Laurel Prevetti.

The town’s ordinance cites the smell and visibility of marijuana as an “attractive nuisance that entices others to the cultivation, and increases the risk of crimes…potentially resulting in serious injury or death.”

San Jose also does not allow outdoor marijuana cultivation, according to Wendy Sollazzi, a division manager in the police department’s medical marijuana control division. While the city does allow medical marijuana facilities to operate—it has 16 licensed dispensaries—officials are now talking about whether to allow medical marijuana distributors, manufacturers and testing labs to operate in the city, and if so, how many and where, Sollazzi said. It’s expected to make some decisions later this year after the state releases its own regulations.

“Staff continues to monitor the progress of state regulations, engage with the state agencies, and is working closely with the registered collectives so that San Jose operations will be compliant with state regulatory requirements by Jan. 1,” Sollazzi said.

For now, only licensed dispensaries are permitted to deliver medical marijuana in San Jose, with violators subject to closure or fines of up to $50,000 a day per offense. All marijuana businesses are required to pay a 10 percent business tax. Last year, the city reaped roughly $10.5 million from that tax and is projecting $9.35 million for this year, according to Sollazzi.

Matt Lucero, founder and director of Buddy’s Cannabis in San Jose, said he’s optimistic that San Jose will loosen its restrictions sooner rather than later. With that outlook, he plans to apply for a license to sell marijuana for recreational use at his medical marijuana dispensary as soon as possible.

“My thought is to apply for as many licenses as I can and see what the city says,” Lucero said.

“To me, this is going to give access to more consumers who are wanting this,” he added. “Obviously, it’s going to be good for dispensaries; it’s going to end more black market sales. Plus, more sales will mean more revenue for the government.”

In anticipation of the changes, he is expanding his 21,000-square-foot indoor grow site and 1,500-square-foot dispensary, hiring more workers, adding more cash registers and offering a delivery service. What he doesn’t anticipate changing, he said, are his prices. Because his dispensary cultivates cannabis on site, he’s able to keep prices low compared to other dispensaries despite the new taxes .

Alex Nemkov, director at the newly opened Coachella Valley Church in San Jose, says passage of Prop. 64 signals a significant change in attitudes towards marijuana use.

“For so long the focus has been on the negative,” he said. “(This) opens up so many positive things in terms of research on the plant. People already know about the medical uses; now it can actually help save lives, and then the recreational part is great, too. I think what we’ve shown here is that it can bring people together in a peaceful, positive way.”

Nemkov runs Coachella as a nonprofit and hesitates to call it a dispensary, although it does sell marijuana (untaxed) and related products to members who are at least 18 years old. Coachella is also a Rastafarian church that uses marijuana instead of wine for the sacrament. Next to cannabis flowers, smoke pipes and edibles, it sells holy water and crosses.

“It’s more about the togetherness and love that we’re promoting more so than the marijuana itself,” Nemkov said.

Meanwhile, the state is busy crafting regulations for commercial marijuana retailers with the goal of finalizing them by mid-November and taking online applications in early December, Traverso said. It should be ready to issue permits by Jan. 1.

Retailers will be subject to strict testing of their plants for pesticides and other contaminants. “We’re going to require that each plant, each edible, go through a pretty rigorous testing process,” Traverso said. “We’ve seen stories about cannabis that’s out there that wouldn’t pass our testing requirements. That’s the reason you create a regulatory model so when you have patients coming in purchasing, they know they’re getting safe cannabis, clean cannabis.”

When cities and counties do come around to allowing dispensaries to sell marijuana for recreational use, they can expect to benefit from a boom in tax revenues.

According to Venus Stromberg, a spokeswoman for the California Department of Tax and Fee Administration, Prop. 64 sets up two new taxes, an excise tax and a cultivation tax. Revenue from both are supposed to reimburse regulatory costs and be disbursed to various agencies.

Some initiatives that stand to benefit from the taxes are a university-led study on the implementation and effects of adult legalization; a study on the protocols for determining impairment to assist law enforcement agencies; programs that support job placement, mental health treatment and substance use disorder treatment; youth education, prevention, early intervention and treatment; environmental restoration and protection; and local and state law enforcement.